TAX PLANNING:

WHAT IS TAX DEDUCTION? TAX DEDUCTIONS UNDER THE SECTION

AND RESPECTIVE SUBSECTIONS OF : 80C,
80D, 80E, 80G, 80 I, SECTIONS 80 JJA, 80QQB, 80RRB, 80TTA, 80U AND
OTHER RELEVANT SECTIONS, DIRECT TAX CODE (DTC),
TAXATION IMPACT ON DIFFERENT INVESTMENT OPTIONS, PERSONAL
TAX PLANNING, FILING IT RETURNS.
What is Tax Deduction?

 Tax deductions are specific expenses or investments that

reduce an individual’s taxable income, thus lowering the
amount of income tax they are required to pay. These
deductions are allowed by the government to encourage
individuals to save and invest, purchase insurance policies,
and contribute to specific funds and schemes.
 standard deduction is a portion of income that is not subject
to tax and can be used to reduce a tax .
80 C

 You can claim a deduction of Rs 1.5 lakh your total income

under section 80C
 One can reduce up to Rs 1,50,000 from your total taxable
income, and it is available for individuals and HUFs.
 Deductions under 80 C
 Investment in PPF
– Employee’s share of PF contribution
– NSCs
– Life Insurance Premium payment
– Children’s Tuition Fee
– Principal Repayment of home loan
– Investment in Sukanya Samridhi Account
– ULIPS
– ELSS
– Sum paid to purchase deferred annuity
– Five year deposit scheme
– Senior Citizens savings scheme
– Subscription to notified securities/notified deposits scheme
– Contribution to notified Pension Fund set up by Mutual Fund or UTI.
– Subscription to Home Loan Account scheme of the National Housing Bank
– Subscription to deposit scheme of a public sector or company engaged in
providing housing finance
– Contribution to notified annuity Plan of LIC
– Subscription to equity shares/ debentures of an approved eligible issue
– Subscription to notified bonds of NABARD
 80D
 Deduction for the premium paid for Medical Insurance

 You (as an individual or HUF) can claim a deduction of Rs.25,000 under

section 80D on insurance for self, spouse and dependent children.
 Deduction for self, spouse and children below the age of 60: ₹ 25,000
 Deduction for parents below the age of 60: ₹ 25,000
 Deduction for self, spouse and children above the age of 60: ₹ 50,000
 Deduction for parents above the age of 60: ₹ 50,000
 Members of HUF below 60: ₹ 25,000
 Members of HUF above 60: ₹ 50,000
 80E
 Deduction for Interest on Education Loan for Higher Studies
 A deduction is allowed to an individual for interest on loans taken for
pursuing higher education. This loan may have been taken for the taxpayer,
spouse or children or for a student for whom the taxpayer is a legal
guardian.
 80E deduction is available for a maximum of 8 years (beginning the year
in which the interest starts getting repaid) or till the entire interest is repaid,
whichever is earlier. There is no restriction on the amount that can be
claimed.
 80 I
Deduction in respect of profits and gains from industrial undertakings
after a certain date
 Where the gross total income of an assesse includes any profits and gains
derived from an industrial undertaking

Eligible Industrial Undertakings: Deductions are available to specified

industrial undertakings engaged in the business of:
 Manufacturing or producing goods.
 Operating or maintaining cold storage plant or plants for the storage of
agricultural produce.
 Developing, maintaining, and operating an industrial park or special
economic zone (SEZ).
 80 I

 Amount of Deduction: The deduction under Section 80I is

allowed at the rate of:
 25% of profits derived from eligible industrial undertakings
in the case of manufacturing enterprises.
 25% of profits derived from eligible industrial undertakings
in the case of cold storage plants.
 100% of profits derived from eligible industrial
undertakings in the case of industrial parks or SEZs.
 80G
Deduction for donations towards Social Causes
 Eligible Donations: Deductions are available for donations made
to:
 Prime Minister's National Relief Fund (PMNRF).
 National Defence Fund (NDF).
 Prime Minister's Armenia Earthquake Relief Fund.
 The Africa Fund.
 The National Children's Fund.
 And many other specified funds, institutions, and organizations as
notified by the government.
a. Donations with 100% deduction without any qualifying limit under 80 G

 National Defence Fund set up by the Central Government

 Prime Minister’s National Relief Fund
 National Foundation for Communal Harmony
 An approved university/educational institution of National eminence
 Zila Saksharta Samiti constituted in any district under the chairmanship of the
Collector of that district
 Fund set up by a State Government for the medical relief to the poor
 National Illness Assistance Fund
 National Blood Transfusion Council or to any State Blood Transfusion Council
 National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental
Retardation and Multiple Disabilities
 National Sports Fund
 National Cultural Fund
 Fund for Technology Development and Application
 National Children’s Fund
 Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to
any State or Union Territory
 The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air
Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund,
1996
 The Maharashtra Chief Minister’s Relief Fund during October 1, 1993 and October
6,1993
 Chief Minister’s Earthquake Relief Fund, Maharashtra
 Any fund set up by the State Government of Gujarat exclusively for providing relief
to the victims of earthquake in Gujarat
 Any trust, institution or fund to which Section 80G(5C) applies for providing relief to
the victims of earthquake in Gujarat (contribution made during January 26, 2001 and
September 30, 2001) or
 Prime Minister’s Armenia Earthquake Relief Fund
 Africa (Public Contributions — India) Fund
 Swachh Bharat Kosh (applicable from financial year 2014-15)
 Clean Ganga Fund (applicable from financial year 2014-15)
 National Fund for Control of Drug Abuse (applicable from financial year 2015-16)
b. Donations with 50% deduction without any qualifying limit

 Jawaharlal Nehru Memorial Fund

 Prime Minister’s Drought Relief Fund
 Indira Gandhi Memorial Trust
 The Rajiv Gandhi Foundation
 c. Donations to the following are eligible for 100% deduction subject to
10% of adjusted gross total income

 Government or any approved local authority, institution or association to

be utilized for the purpose of promoting family planning
 Donation by a Company to the Indian Olympic Association or to any other
notified association or institution established in India for the development
of infrastructure for sports and games in India or the sponsorship of sports
and games in India
d. Donations to the following are eligible for 50% deduction subject
to 10% of adjusted gross total income

 Any other fund or any institution which satisfies conditions mentioned in

Section 80G(5)
 Government or any local authority to be utilized for any charitable purpose
other than the purpose of promoting family planning
 Any authority constituted in India for the purpose of dealing with and
satisfying the need for housing accommodation or for the purpose of
planning, development or improvement of cities, towns, villages or both
 Any corporation referred in Section 10(26BB) for promoting the interest of
minority community
 For repairs or renovation of any notified temple, mosque, gurudwara,
church or other places.
 Sections 80 JJA

 Deduction In Respect Of Profit And Gains From Business

Of Collecting And Processing Of Bio-Degradable Waste.
 generating power, or
 producing, bio-fertilizers, bio-pesticides or other biological
agents, or
 producing bio-gas, or
 making pellets or briquettes for fuel, or
 organic manure,
(100% profit from the above activity is deductible for first 5
years beginning with the assessment year relevant to the
previous year in which such business commences.)
 80QQB

 Deduction for Royalty Income of Authors

 Authors write books and give it to publishers. Publishers
publish them and earn profit on selling those. They pay an
agreed percentage of profit or sales made to the authors as a
reward or compensation for writing books. This reward or
compensation is called Royalty.
 Deduction available will be lower of the following:
 a. Rs 3 lakhs or
 b. The amount of royalty income received
 80RRB
 Deduction with respect to any Income by way of Royalty of a Patent
 80RRB Deduction for any income by way of royalty for a patent,
registered on or after 1 April 2003 under the Patents Act 1970, shall be
available for up to Rs.3 lakh or the income received, whichever is less. The
taxpayer must be an individual patentee and an Indian resident. The
taxpayer must furnish a certificate in the prescribed form duly signed by
the prescribed authority.
 80TTA

 Deduction from Gross Total Income for Interest on

Savings Bank Account
 If you are an individual or an HUF, you may claim a
deduction of maximum Rs 10,000 against interest income
from your savings account with a bank, co-operative
society, or post office. Do include the interest from savings
bank account in other income.
 Section 80TTA deduction is not available on interest income
from fixed deposits, recurring deposits, or interest income
from corporate bonds.
 80U
 Deduction for Person suffering from Physical Disability
 A deduction of Rs.75,000 is available to a resident individual who suffers
from a physical disability (including blindness) or mental retardation. In case
of severe disability, one can claim a deduction of Rs 1,25,000.
 From FY 2015-16 – Section 80U deduction limit of Rs 50,000 has been raised
to Rs 75,000 and Rs 1,00,000 has been raised to Rs 1,25,000.
 India has been trying hard to modify and modernise the six-
decade old Income Tax Act for the last several years.
 Attempts were made previously to bring a Direct Tax Code
(DTC).
 Still, several issues blocked the design of such a big law to
replace the mammoth Income Tax Act that was drafted in
1961.
 In the 2020 budget, it is expected that there is every chance for the
old law to be scrapped.
 In its place a new Direct Tax Code (DTC) is to be inducted. The
task force on DTC’s recommendations to the government on
August 18, 2019 added additional element to the budget.
 The task force has also provided a draft law for replacing the 1961
Income Tax Act.
 The IT Act covers several taxes including personal income tax,
corporate tax and levies such as capital gains tax, dividend
distribution tax etc.
Direct Taxes Code (DTC)

What is Direct Tax Code

Direct Tax Code is set of rules that is going to replace the

existing Income Tax Act (IT Act).
It covers all taxes that is under the present IT Act including
corporate income tax and personal income tax.
Effort to create a DTC started from 2009 onwards.
 Why DTC?
 The most important reason for scrapping the Income Tax Act is that it is
age-old and complex.
 It has nearly 700 sections.
 Economic and business environment has changed big since 1961.
 The Vodafone case where the government lost battle at the supreme
court is a classic example for the lack of flexibility of the IT Act .
 Prime Minister Narendra Modi, in 2017, had observed that the
Income-Tax Act, 1961, was drafted more than 50 years ago and it needs
to be redrafted.
Direct Tax Code – Brief History· The first Draft Direct Taxes Code
Bill was released on August 12, 2009,
· Revised Discussion Paper (RDP) was created in 2010.
· DTC 2010 was introduced in Parliament.
· A Standing Committee of Finance (SCF) was appointed to discuss
it with various stakeholders.
The SCF submitted its report to Parliament in 2012.
· A ‘revised’ version of DTC was released in 2014 after the report
by the SCF.
· Later it was lapsed with the change in government.
· In 2017, NDA government set up an expert committee to draft a
new Direct Taxes Code.
· Report of the task force on DTC was submitted to Finance
Minister Nirmala Sitharaman on August 19, 2019.
· Budget 2020 is expected to take steps to implement the DTC.
 Task of the committee

 Main recommendation of the committee was to make the I-T Act simpler,
with focus on easing the burden on individuals and companies so that
economic growth can be supported with incentives and easing of economic
activities.

 The task force was assigned to design direct tax laws by considering the
standards prevailing in other countries.

 It hast to incorporate international best practices, at the same time keeping in

mind the economic peculiarities of the country.
 Composition of the Task
Force
 The taskforce was originally led by Arbind Modi but was later replaced
(after the retirement of Sri Modi) by Akhilesh Ranjan (convenor), who
is a CBDT member.

 Other members of the eight-member task force include Girish Ahuja

(chartered accountant), Rajiv Memani (Chairman and Regional
Managing Partner of EY), Mukesh Patel (Practicing Tax Advocate),
Mansi Kedia (Consultant, ICRIER) and G C Srivastava (retired IRS and
Advocate).
 The taskforce submitted its recommendations on august 19, 2019.
 According to press information, the report has two parts:
(1) Recommendations and
(2) Draft Bill.
 The Ministry has kept the report in secret and hence details of the report
is not available in the public domain.
 Finance Ministry is believed to be working on the report for its
implementation through budget 2020.
 The task force is believed to have made several recommendations that is
aimed to reduce the tax complications for the individuals as well as that for
the corporate.
 It has highlighted the need to review existing tax brackets, surcharges and
implementation of special guidelines for start-ups.
 For individuals: the task force recommended simplification and
rationalization of the tax slabs and elimination of excess surcharges.
 For companies: the task force suggested uniform tax rate for domestic and
foreign companies. It also recommended a branch profit tax for repatriation
of profit and other income by foreign companies from India. The task force
also recommended special provisions for start-ups.
 Following are the main
recommendations of the Task force on
DTC
 Personal Income Tax: simplification of personal income tax
structure
 The popular recommendation of the task force is regarding personal
income tax structure.
 Slabs and rates are remaining constant for several years though some
ad hoc changes in the form of rebate, standard reduction etc occurred
from lower tax slabs.
 Figure: Unchanged exemption limit (Rs 2.5 lakh) and the higher
income tax slab (Rs 10 lakh and above) for the last several years.
Uniform corporate tax for domestic and foreign companies
 At present, there is different corporate income tax for domestic
companies (25.17%) and foreign companies (40% plus surcharge
and cess).
 This tax rate is among the highest in the world. Hence, the task
force suggested for imposing uniform tax rate.
 Abolition of Dividend Distribution Tax (DDT)
 The task force recommended the abolition of DDT. At present
domestic companies have to pay a tax of 20.65% on the dividend
distributed to their investors.
Branch Profit tax
 Foreign companies have to pay a repatriation tax in the form
of branch profit tax on the earnings they repatriate to their overseas
parent company.
 This branch profit tax will be in addition to the corporate tax they pay
to the government.
 The proposed branch profit tax is in the spirit of the US Act – Tax
Cuts and Jobs Act that encourages US companies to directly bring
overseas profit to the US than to shifting them to tax havens.
 Assessing unit instead of assessment officer
 Harassment by tax officials is a major defect of the present regime.
 Hence, instead of assessment officer, assessment units will be
created to deal with individual taxpayers.
 For corporate taxpayers also there will be assessment units
including multiple officers along with industry specialists.
 All communication between taxpayers and taxmen will be digital.
 Mediation between CBDT and the taxpayer
 The task force recommends a new concept of mediation between
taxpayer and CBDT to reduce the volume of litigations.
Litigation Management Unit
 Deviating from the current practice, the Task Force is
recommended a separate Litigation Management Unit to manage
the entire tax litigation process.
 The litigation unit should engage in issues ranging from deciding in
which cases the appeals ought to be filed to devising the strategy to
defend a case.
 Public Ruling Option for Taxpayers
 A concept of “public ruling” has been recommended by the
taskforce. Here, taxpayers will have the option of
approaching the Central Board for Direct Taxes (CBDT) for
clarification on any important point of law that is not case or
fact specific.
 Key points of Direct Taxes Code 2.0

 — Those earning up to Rs 55 lakh may get major tax relief

 — Foreign firms may have to pay branch profit tax

 — Dividend distribution tax may be done away with

 — A slew of incentives for start-ups

 — Assessing units to replace assessment officers

 — Mechanism of mediation between taxpayers and CBDT

 — Proposed DTC to have far fewer sections than over 700 in the Income Tax Act
 Personal tax planning

 5 years Bank Fixed Deposit.

 Public Provident Fund (PPF)
 National Savings Certificate (NSC)
 Equity Linked Saving Schemes (ELSS)
 Unit Linked Investment Plan (ULIP)
 National Pension Scheme.
 Life Insurance.
Ivestment Returns Lock-in Period

5-Year Bank Fixed Deposit 6% to 7% 5 years

Public Provident Fund (PPF) 7% to 8% 15 years

National Savings Certificate 7% to 8% 5 years

National Pension System (NPS) 12% to 14% Till Retirement

ELSS Funds 15% to 18% 3 years

Unit Linked Insurance Plan (ULIP) Varies with Plan Chosen 5 years

Sukanya Samriddhi Yojana (SSY) 7.60% N/A

Senior Citizen Saving Scheme 7.40% 5 years

(SCSS)
THANK YOU